We Need to Know Who's Really in Charge

One of government minister Vince Cable's first headaches this autumn will be to decide whether to allow the public to find out who really controls 2.5 million companies in the UK.

You could be forgiven for thinking that such information is already out there, perhaps on the internet or from Companies House - but you'd be wrong.

At present, the people in control of most UK companies have no obligation to reveal their identities. The law allows them to pay other people (and even other companies) to be directors of their businesses. But they - the so-called beneficial owners - remain fully in charge behind the scenes.

Their companies may have no offices or staff of their own and often they exist only on paper, as legal entities that do deals just like any other firm. Even the police can find it impossible to trace who's really pulling the strings.

The hidden owners of companies involved in crime have the comfort of knowing that even the police will find it hard or impossible to trace them, because of secrecy or lack of proof that they are behind things.

The only UK company owners who currently have to reveal their identities are those who own more than 3 per cent of the shares of firms listed on the main market of the London Stock Exchange.

There are currently a further 410,000 beneficial owners of UK companies who are not registered anywhere, the Government estimates in its Transparency and Trust consultation paper.

The good news is that this is going to change. In July, business minister Vince Cable revealed plans to require all UK companies to identify everyone who owns them or otherwise is in control - and declare the information to the Government.

It will then create a new central register of beneficial owners. It reckons that some 2.5 million companies will be affected by the new register, of which 2.3 million are small companies.

The bad news is that the Government says it has not decided whether the register should be public. It may be confined to the police, the taxman and others who enforce the law.

Vince Cable's consultation paper leans gently towards a public register but it acknowledges that some companies want to hide the identity of their real owners - and that some investors don't want the public to know where they've put their money.

Well, too bad. The arguments in favour of a public register vastly outweigh these selfish concerns. (I am not thinking about people whose security might be endangered by their identities becoming known, for whom separate arrangements will be made.)

Let's remember that the purpose of a register of beneficial owners is to stop criminals using companies for money laundering, tax evasion and worse. The more accurate and comprehensive that register, the better.

Vince Cable's consultation paper explains that if the public can see the register, then errors and inaccuracies are more likely to be spotted and corrected. A public register would also allow 'investors, the market and other companies to understand better with whom they are doing business', it adds.

Another important point (which Mr Cable doesn't make) is that if ordinary people, journalists, campaigners and other companies can see the information in the register, then they will be able to put pressure on the police and the taxman to act, when companies are being used for criminal activities.

There is a growing lobby in favour of a register open to all. It includes people who rarely agree - among them the Institute of Directors, Private Eye magazine, Global Witness, Christian Aid and its Chair Rowan Williams, as well as Conservative MP Sir Tony Baldry, Labour MP John Mann and Lib Dem MP Tessa Munt. The Confederation of British Industry's head of tax has described a public register as a 'no-brainer' while the International Banking Federation believes it would help banks prevent money laundering.

The public also seem to favour openness. A new ComRes poll for Christian Aid reveals that 57 per cent of Britons believe company owners should not be allowed to keep their identities secret. Of the 2,028 Britons questioned, 58 per cent also agreed that the register should be open to the public, as well as tax and law enforcement authorities.

Of course, the register won't be a cure-all. Around the world there are millions of foreign firms with secret owners which won't be touched by the new register, even if they are operating in the UK. But the UK must start somewhere. It worked with other countries on beneficial owners at the G8 summit in June and should continue to do so.

It should also sort out the UK's tax havens, also known as the Overseas Territories and Crown Dependencies, which currently host hundreds of thousands of registered companies. As Conservative MP Tony Baldry has argued, if these tax havens expect the protection of the UK, then they should clean up their own financial acts. A crucial part of this is to let the world see who really owns the companies they host, some of which are involved in serious crime.

The UK Government's consultation on a new register closes on Monday September 16th. Christian Aid is asking people to contact Vince Cable and urge him and the Government to put their transparency money where their mouth is. The register of beneficial owners must be a public one.